Rio Tinto is on the hunt for a new chief executive with a flair for dealmaking, sparking discussions about its capacity for strategic acquisitions as it aims to move beyond historical blunders in the mining sector.
Chair Dominic Barton is reportedly in search of a leader who can execute major takeovers while simultaneously reducing costs and boosting productivity – a combination that’s considered quite exceptional, as reported by City AM.
The mining sector has historically been fixated on mergers and acquisitions, having gone through a spree of transactions from 2006 to 2011.
However, the landscape shifted when commodity prices fell for an extended period, leading to criticism of miners for their extravagant spending on deals.
Rio Tinto was among those most heavily censured, with a string of failed acquisitions culminating in the departure of CEO Tom Albanese in 2013 after the company faced enormous writedowns. The firm had to acknowledge a $14bn (£10.3bn) loss following its purchases of Canadian aluminium company Alcan and coal miner Riversdale Mining.
Rio Tinto looks to future deals
The company is in need of an individual with a “bold vision” to elevate the business and “widen the gap against competitors,” according to Dan Coatsworth, an investment expert at AJ Bell.
However, Coatsworth warns against falling into the trap of “previous mistakes” by pursuing transformational deals that have historically “ended up destroying value.”
This development comes at a time when the mining industry is anticipating a surge in mergers and acquisitions, with leaders including Rio Tinto’s outgoing chief Jakob Stausholm advising caution to avoid hasty and imprudent deal-making.
There was speculation that Rio might launch a counterbid for Anglo American following BHP’s overtures to acquire the FTSE 100-listed miner in 2024, but such moves did not materialise. Similarly, earlier this year, rumours of a potential merger between Glencore and Rio Tinto came to naught.
“A lot of deals were made between 2005 and 2012 and a lot of these turned out to be really bad,” Stausholm remarked to the Financial Times in March.
“Now it feels like things are opening up a little bit . . . but from the Rio Tinto perspective, that’s not that relevant: I have no fomo, or fear of missing out.”
Rio Tinto’s shares have seen a nearly 10 per cent decline over the past year.
